By Alexander Osipovich, Avantika Chilkoti and Frances Yoon 

Stocks fell Wednesday after President Trump issued a stark new warning on the spread of the novel coronavirus in the U.S., reviving concerns about the potential damage to the world's largest economy.

The Dow Jones Industrial Average dropped 909 points, or 4.1%, in midday trading, a day after the index closed out its worst quarter since 1987. The S&P 500 fell 4.4%, while the Nasdaq Composite was down 3.9%.

European stocks also fell, with the pan-continental Stoxx Europe 600 index retreating 2.9%.

Mr. Trump warned that the U.S. could face as many as 240,000 deaths as he asked Americans to brace for an unprecedented crisis in the days ahead. The nation has more confirmed cases than any other country, with more than 189,000 infections, and projections from the University of Washington show the illness could result in 2,214 deaths a day at the peak in two weeks.

"We're slowly peering through the fog and trying to see how bad things will become, but essentially we are flying blind," said Peter Dixon, a senior economist at Commerzbank. "It's very clear this is going to be the biggest sudden stop in measured history: The economy is just going to hit the buffers."

As investors turned to assets that are perceived to be the safest, the yield on the 10-year U.S. Treasury note fell to 0.597%, from 0.691% Tuesday. Yields drop as bond prices climb.

All 11 sectors of the S&P 500 were down on Wednesday, with real-estate companies, utilities and financials among the worst decliners. JPMorgan Chase shares fell 5.2%. Banks have been squeezed by both the decline in business activity and the Federal Reserve slashing interest rates to near zero.

Philip Blancato, CEO of Ladenburg Thalmann Asset Management, said the market had entered a new phase after the initial shock of the pandemic triggered a precipitous drop in major stock indexes. Stocks are cheap enough now that investors are eyeing opportunities and hoping the market will bottom out once measures to battle the virus show signs of effectiveness, he said.

"Stocks are now inexpensive," Mr. Blancato said. "If they're cheap, that creates a floor in the market for companies with good fundamentals."

In corporate news, Marriott International shares dropped 6.2%, a day after the hotel chain said it is investigating a data breach that exposed up to 5.2 million customers' personal information. HP shares tumbled 9.5% after Xerox Holdings called off its hostile bid to take over the PC and desktop-printer maker, saying the pandemic had undermined its ability to carry out the deal.

Futures on Brent crude, the global oil benchmark, dropped 5.6% to $24.88 a barrel after an agreement between major oil-producing nations limiting the output lapsed overnight. Saudi Arabia is preparing to flood oil markets as early as Wednesday as the kingdom forges ahead in a price war with Russia. Oil prices have tumbled more than 60% so far this year.

The WSJ Dollar Index, which tracks the greenback against a basket of currencies, gained 0.5% after the Fed took fresh steps to alleviate stresses in currency markets. On Tuesday, the U.S. central bank said it would launch a temporary lending facility that would allow foreign central banks to convert their holdings of Treasury securities into dollars.

A series of business surveys released Wednesday showed factories across Asia and Europe cut output and jobs at the fastest pace since the global financial crisis. The figures painted an almost uniform picture of sharply declining production, falling new orders and contracting payrolls. The main exception was China, which saw a slight rebound in activity as its economy began to thaw out, having been the first frozen.

Fresh data showed the U.S. factory sector also contracted in March as the coronavirus disrupted supply chains and shut down businesses, although not as badly as economists had feared.

The Institute for Supply Management said its manufacturing index fell to 49.1 in March from 50.1 in February. Economists had expected a reading of 44.5. Any number above 50 indicates an expansion of activity across the manufacturing sector, while readings below 50 signal a contraction.

In Asian markets, Japan's Nikkei 225 lost 4.5% and Hong Kong's Hang Seng closed 2.2% lower.

U.S. lawmakers have already passed three major pieces of legislation to keep the virus outbreak from throwing the economy into the deepest downturn since the Great Depression, while the Fed has slashed its benchmark interest rate to near zero.

"In the U.S., we're at the beginning of a downturn," said Steven Englander, global head of G-10 foreign-exchange research and North America macro strategy at Standard Chartered Bank. "We're likely to see more unemployment, and the early bottom could come in May, but that is very speculative. For that to happen, we need a lot of good luck and serious implementation of economic and health-care policy."

While stimulus packages are good for the economy and would help American employees get through the next two months, there might be a need for "trillions more," Mr. Englander said. On Tuesday, Mr. Trump called for a new infrastructure-focused spending bill worth $2 trillion.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com, Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Frances Yoon at frances.yoon@wsj.com

(END) Dow Jones Newswires

April 01, 2020 13:19 ET (17:19 GMT)